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Analysts response: Mulberry profit slump

As Mulberry blames the “difficult” economic climate in the UK for a £10m drop in profits, Drapers takes a look at what the analysts said of the label’s performance.

The group noted that 80% of its sales were derived from the UK and European markets where the economy was still a challenge, and it now plans to focus on driving profits internationally.

Independent analyst Nick Bubb said: “The key interest today is in what Mulberry says in its finals about the outlook.  At first the comment looks ominous, but the statement goes on to say that in the 10 weeks to June 8 total retail sales were 9% up (LFL sales up 6%), which will reassure investors.”

Panmure Gordon analyst Philip Dorgan also picked up on this rise in retail sales, stating that “current trade is stronger than we feared, against tough comparisons”.

Dorgan kept the hold recommendation, but said the firm was lowering expectations for 2015 from £34.2m to £30.9m to “reflect the impact of investment in developing a truly global proposition.”

Barclays analyst Julia Hanrahan said the bank was confident that Mulberry can move from a domestic UK brand to a global brand, and that this will provide “significant long-term growth potential.”

Gregor Jackson, partner at luxury retail consultant gpstudio said Mulberry is a “victim of its own success as the overexposure of its signature handbags has led to a perceived dilution of their luxury status among discerning, high-end consumers.” However he added that the brand has a “huge opportunity to grow in Asian markets where they currently don’t have a large physical presence.”

Ivailo Jordanov, chief exceutive of online fashion portal, said the brand was experiencing “growing pains” and needed a “clear growth strategy”.

Jordanov continued: “The real money for a luxury retailer is in Asia, but with a slowdown in Chinese sales it needs to ramp up its international efforts while maintaining the cool factor.”

He added that these figures come as an “extra twist of the knife” following this week’s departure of creative director Emma Hill.

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